A REALISTIC
SCENARIO
What must be
done if we are to avert the pessimistic scenario; a list of specific measures that must be taken to stop the
monetary binge; an appraisal of how severe the economic hangover will be; a checklist for personal
survival—and beyond.
The pessimistic scenario presented in the previous chapter is the kind of
narrative that turns people off. No one wants to hear those things, even if they
are true—or we should say especially if they are true. As Adlai Stevenson said when he was a
candidate for President: "The contest between agreeable fancy and
disagreeable fact is unequal. Americans are suckers for good news."
So,
where is the optimistic scenario in which everything turns out all right, in which
prosperity is restored and freedom is preserved after all? Actually, it is
not hard to locate. You can find it every day somewhere in your newspaper. It is the
shared faith of almost all politicians, experts, and commentators. If that
is what you want to hear, you have just wasted a lot of time reading this book.
There is no optimistic scenario. Events have progressed too
far for that. Even if we begin to turn things around by forcing Congress to cut spending,
reduce the debt, and disentangle from UN treaties, the Cabal will not let go
without a ferocious fight. When the Second Bank of the United States was
struggling for its life in 1834, Nicholas Biddle, who controlled it, set about
to cause as much havoc in the economy as possible and then to blame it
on President Jackson's anti-bank policies. By suddenly tightening credit and withdrawing money
from circulation, he triggered a full-scale national depression. At the height of his
attack, he declared: "All other banks and all the merchants may
break, but the
Bank of the United States shall not break." 1 The amount of devastation that
could be caused by today's Federal Reserve is infinitely greater than what Biddle
was able to unleash. It would be pure self-deception to think that the Cabal would quietly
give up its power
without exercising that option. We must conclude that no one is going to
get out of this one unscathed. There is hell to pay, and it is we who
are going to pay it.
SEVENTH REASON
TO ABOLISH THE FED
What has any of this to do with the
Federal Reserve System? The answer is
that the Federal Reserve is the starting point of the pessimistic scenario. The chain of events begins with
fiat money created by a
central bank, which leads to government debt, which causes inflation, which destroys the
economy, which impoverishes the people, which provides an excuse for increasing government power, which is an on-going process
culminating in totalitarianism. Eliminate the Federal Reserve from this equation, and the
pessimistic scenario
ceases to exist. That is the seventh and final reason to abolish the Fed: It is an instrument of totalitarianism.
If the optimistic scenario is too
optimistic and the pessimistic scenario is too pessimistic, then what is the scenario that we should hope lies in our future?
There is a middle course that lies
between optimism and pessimism. It is
called realism. Calling it a realistic scenario is not meant to imply that it is
predetermined to happen, nor that it is even likely to happen. It is realistic
only in the sense that it can happen if certain conditions are met. The balance of this
chapter will be devoted
to an analysis of those conditions.
Let us begin by allowing our
opponent, Cynicism, to state the problem we face: "Is it realistic to believe that
the current trends can actually be
reversed? Isn't it just fantasy to think that anything can be done at this late date to break
the CFR's hold over government,
media, and education? Do we really expect the gum-chewing public to go upstream against the
indoctrination of newspapers,
magazines, television, and movies?"
Apathy joins in:
"Forget it. There's nothing you can do. The bankers and politicians have all the
money and all the power. The
1. See chapter seventeen.
game is already over. Make the most
of it, and enjoy life while you can."
Do not listen to Cynicism and
Apathy. They are agents of your enemy. They want you to quietly get in line and submit
without a struggle. However,
they do make a point that must not be overlooked. The battle has progressed far, and our
position is not good. If we are
to reverse the present trends, we must be prepared to make a herculean effort. That does
not mean "Write your Congressman" or "Vote on Tuesday" or "Sign a
petition" or "Send in a donation." That is far too easy. Those measures still play an
important role
in the battle plan but they fall far short of the need. Armchair campaigns will no longer do
it.
Before turning to the question of
what kind of effort will be required, let us
first be clear on what it is we want to accomplish.
WHAT MUST NOT BE DONE
Let us begin with the negatives: what
must not be done. The most obvious item in this category
is that we must not turn to government for more of the same "cures" that have made us
ill. We do not want
more power granted to the Fed or the Treasury or the President, nor do we need another
government agency. We probably don't even need any new laws, with the possible exception of those legislative acts which repeal
some of the old laws now on the books. Our goal is the reduction of government, not its
expansion.
We do not want to merely abolish the Fed and
turn over its operation to the
Treasury. That is a popular proposal among those who know there is a problem but who have not studied the
history of central
banking. It is a recurrent theme of the Populist movement and those advocating what they call
Social Credit. Their argument is that the Federal Reserve is privately owned and is independent of political control. Only Congress
is authorized to issue the nation's money, not a group of private bankers. Let the Treasury issue
paper money and bank credit, they say, and we can have all the money we need without having to
pay one penny in interest to the bankers.
It is an appealing argument, but it
contains serious flaws. First, the concept that the Fed is privately owned is a legal fiction. The member banks hold stock, but it
carries no voting weight. No matter how large the bank or how much capital is paid in, each bank has one vote. The stock cannot
be sold or traded. Stockholders
have
none of the usual elements of control that come with ownership and, in fact, they are subservient to the central board. The seven members of the Board of Governors are
appointed by the President and
confirmed by the Senate. It is true that the Fed is independent of direct political control, but it must never
be forgotten that it was
created by Congress and it can be extinguished by Congress. In truth, the Federal
Reserve is neither an arm of government nor is it private. It is a hybrid. It is an association of
the large commercial
banks which has been granted special privileges by Congress. A more accurate description would be simply
that it is a cartel protected by federal law.
But the more important point is that
it makes no difference whether the Fed
is government or private. Even if it were entirely private, merely turning it over to
the government would not alter its function. The same people undoubtedly would run it, and they would continue to create money for
political purposes. The Bank of England is the granddaddy of central banks. It was
privately owned at its
inception but became an, official arm of the British government in more recent times. It
continues to operate as a central bank, and nothing of substance has changed. The central banks of all the other
industrialized nations are direct arms of their respective governments. They are indistinguishable in
function from the
Federal Reserve. The technicalities of structure and ownership are not as important as
function. Turning the Federal Reserve over to the Treasury without at the same time denuding it of
its function as a central bank—that is, its ability to manipulate the money supply—would be a colossal
waste of time.
The proposal of having the Treasury
issue the nation's money is another question and has nothing to do with who owns the Fed. There is nothing wrong with the
federal government issuing money so long as it abides by the Constitution and adheres to the
principle of honesty. Both of these restraints forbid Congress from issuing paper money that is not 100%
backed by gold or silver. If you are in doubt about the reasoning behind that statement, it would be a good idea to review
chapter fifteen before continuing.
It is true that,
if Congress had the power to create as much money as it needs without the Federal Reserve System, interest
would not have
to be paid on the national debt; but the Fed holds only a small portion of the debt. The
majority of those bonds are held by individuals and institutions in the private sector. Terminat-
ing interest
payments would not hurt those big, bad bankers nearly as much as it
would the millions of people who would lose their insurance
policies, investments, and retirement plans. The Social Credit scheme
would wipe out the economy in one fell swoop.
And we still would
not have solved the deeper problem. The bankers would be cut out of the scam,
but the politicians would remain. Congress would now be acting as its own
central bank, the money supply would continue to expand, inflation would continue to roar, and the
nation would continue to die. Besides, issuing money without gold or silver backing
violates the Constitution.
THE JFK RUMOR
In 1981, a rumor
was circulated that President Kennedy had been assassinated by agents of the
hidden money power because he had signed Executive Order #11110 instructing the
Treasury to print more than $4 billion in United States Notes. That is precisely the kind of money
we are discussing: paper currency without gold or silver backing issued by the
government, not the Federal Reserve. According to the rumor, the bankers were
furious because they would lose interest payments on the money supply. When the Order was tracked down, however, it
involved Silver Certificates, not United States
Notes. Silver Certificates are backed by silver, which means they are real money, so
the rumor was wrong on that point. But there is no interest paid on Silver Certificates
either, so the rumor held up on that point. There was a third point, however, which everyone
seemed to overlook. The Executive Order did not instruct the Treasury to issue
Silver Certificates. It merely authorized it to do so if the occasion should
arise. The occasion never arose. The last issuance of Silver
Certificates was in 1957, and that was six years before the Kennedy
executive order. In 1987, the order was rescinded by Executive Order 12608
signed by President Reagan.
The government
did print some U.S. Notes in 1963, but these were in response to an 1868 act of
Congress which directed the Treasury to maintain the amount of U.S. Notes
outstanding at a fixed level. That required worn or damaged specimens of older Notes to be
replaced by new ones. Some of these new Notes did get into circulation
but were quickly snapped up by private collectors. They never became a significant part of
the money supply and were not intended to.
This printing was not ordered by JFK and, in fact, there was no reason for him even to have had knowledge of it.
The
persistent rumor regarding the bankers' role in JFK's death was reinforced by several books circulated in
conservative circles. They contained
an ominous passage from Kennedy's speech at Columbia University, just ten days before his
assassination. He is quoted as
saying: "The high office of President has been used to foment a plot to destroy the
Americans' freedom, and before I leave office I must inform the citizen of
his plight." 1 However, when Columbia University was contacted to
provide a transcript of the speech, it was learned that Kennedy never spoke there—neither ten days before his assassination nor at any other
time! Ronald Whealan,
head librarian
at the John Fitzgerald Kennedy Library in Boston, provides this additional
information: "Ten days prior to the assassination he was at the White House meeting with,
among others, the
ambassador to the United States from Portugal." 2
It is possible
that the President did make the remarks attributed to him on a different date before a
different audience. Even so, it is a cryptic message which could have several meanings.
That he intended to
expose the Fed is the least likely of them
all. Kennedy had been a
life-long socialist and internationalist. He had attended the Fabian London School of
Economics; participated in the destruction of the American money supply; and engineered the transfer of American wealth to
foreign nations. (See page 109.) There is little reason to believe that he had suddenly
"seen the light" and
was reversing his life-long beliefs and commitments. 3
MONETARISTS VS SUPPLY-SIDERS
But we are off the topic. Let us return to those
unworkable theories
regarding monetary reform. Prominent in this category are the Monetarists and the
Supply-Siders. The Monetarists, adhering to the theories of Milton Friedman, believe that money
should continue to be
created by the Mandrake Mechanism of the Federal Reserve, but that the supply should be determined by a
strict formula
established by Congress, not the Fed. The Supply-siders, represented by Arthur Laffer and Charles Kadlec, believe
in
1.
Quoted by M.J. "Red" Beckman, Born Again
Republic (Billings,
Montana: Freedom Church,
1981), p. 23; also by Lindsey Williams, To Seduce A Nation (Kasilof, Arkansas: Worth Publishing, 1984),
p. 26.
2.
Letter to Hollee
Haswell, Curator at the Low Memorial Library, Columbia University, October 13, 1987.
3.
For a more comprehensive analysis of the "JFK
Myth," visit the web site, www.realityzone.com, and see the
Update section for The Creature from Jekyll Island.
formulas also,
but they have a different one. They want the quantity of money to be determined by
the current demand for gold. They are not talking about a true gold standard in
which paper money is fully backed. By following what they call a "gold-price
rule," they would simply observe the price of gold in the free market
and then tinker with the dollar by expanding or contracting the money supply to
keep its relative value, compared to gold, fairly constant.
These groups
share the same underlying philosophy. Each has a different formula, but they agree
on method: manipulation of the money supply. They share the same conviction that the
free market will not work without assistance; the same faith in the wisdom and integrity of
politically-created formulas, bureaus, and agencies. The Fed remains
unscathed throughout all these debates because it is the ultimate
mechanism for intervention. These people don't really want to change it. They
just want their turn at running it.
Occasionally a
truly original proposal appears that captures one's attention. Addressing a
prestigious gathering of conservative monetary theorists in 1989, Jerry
Jordan suggested that the monetary base could be expanded by holding a national
lottery. The government would pay out more dollars in prize money than it received in
ticket sales. The excess would represent the amount by which the monetary
base would expand. Presumably, if they wanted to contract the money supply,
they would pay out fewer dollars than taken in. It was an intriguing thought, but Mr. Jordan was quick to add:
"The problem, of course, is that there would not be any effective
institutional restraint on the growth of the monetary base."1 Indeed, that is
the problem with all schemes involving monetary control by men.
BALANCED-BUDGET AMENDMENT
A so-called balanced-budget amendment
to the Constitution is not the answer either. In fact, it is an illusion and a fraud. Some of the
biggest spenders in Congress are supporters. They know that it is popular with
the voters but would not cramp their spending style in the least. If they were not
permitted to spend more than they receive in taxes, they would have a perfect
excuse for raising taxes. It would be a way of punishing the voters for placing limits
on them. The voters, on the other hand, would collapse
under the burden of higher
taxes and demand that their Congressmen circumvent the very amendment they previously supported.
And that would be
easy. Most versions of the balanced-budget amendment have an escape hatch built for just that purpose.
Congress shall balance
its budget "except in
cases of emergency." Who decides what constitutes
an emergency? Congress, of course. In other words, Congress shall balance its budget except when it
doesn't want to. So what
else is new?
A serious amendment would have to
tackle, not balancing the budget, but limiting the spending. If that were done, the budget would take care of itself. But even
that would be a waste of time considering the present composition of Congress. Instead of generating political pressure for a
Constitutional amendment, we would be better off directing that same effort toward throwing
the big spenders out of
office. As long as the spenders are allowed to stay in there, they will find a way to
get around any law—including the Constitution itself.
Another flaw in most versions of the
balanced-budget amendment is that it
would not affect the off-budget expenditures called entitlements. They now represent 52%
of all federal outlays and are growing by 12% each year. A strategy that ignores that backbreaking load is not worth even
considering. Even if Congress could be forced to stop deficit spending, the balanced-budget amendment would not solve the
problem of inflation or paying off the national debt. The Federal Reserve can now inflate
our money supply by using
literally any debt in the world. It does not have to come from Congress. Unless we zero in
on the Fed itself, we will just be playing political games with no chance of winning.
Every year, a few concerned
Congressmen submit a bill to investigate or audit the Federal Reserve System. They are to be commended for their effort, but the
process has been an exercise in futility. Their bills receive little or no publicity and
never get out of committee for a
vote. Even if they did receive serious attention, however, they could actually be
counterproductive.
On the surface, it would appear that
there is nothing wrong with a
Congressional investigation or an audit, but what is there to investigate? We must assume the Fed
is doing exactly what it says and is in total compliance with the law. A few minor improprieties probably would be discovered
involving personal abuse of funds
or insider profiteering, but that
would be minor compared to the gigantic fraud that already is out in the open for all to see. The Federal Reserve is the world's
largest and most successful scam. Anyone who understands the nature of money can see that
without a team of investigators and
auditors.
The danger in a proposal to audit
the Fed is that it would delay serious action for years while the audit is going on. It would give the false impression that Congress
is doing
something. It
also would give
the monetary technicians an opportunity to lay down a smoke screen of verbiage and confusing statistics. The public
would expect that all the
answers will be forthcoming from the investigation, but the very groups and combines that need to be
investigated would be
conducting, or at least confounding, the investigation. By the time fourteen volumes of
testimony, charts, tables, and exhibits finally appear, the public would be intimidated and
fatigued. We do not need a
bill to audit the Fed. We need one to abolish it.
A PLAN FOR ELIMINATING THE FED
So much for things not to do. All that would be required to
abolish the Federal Reserve
System is an act of Congress consisting of one sentence: The Federal Reserve Act and all of its amendments are
hereby rescinded.
But that would
wipe out our monetary system overnight and create such havoc in the economy that it would play right
into the hands of the globalists. They would use the resulting chaos as evidence that such a move
was a mistake, and the American people
then likely would welcome a rescue from the IMF/World Bank. We would find ourselves back in the
Pessimistic Scenario even though we had done the right thing.
There are
certain steps that must precede the abandonment of the Fed if we are to have a
safe passage. The first step is to convert our present fiat money into real money. That means we
must create an entirely new
money supply which is 100% backed by precious metal—and we must do so within a reasonably short period
of time.1 To that end, we also must establish
the true value of our present fiat
money so it can be exchanged for new money on a
1. Most money is issued by
governments, but there are many examples of private money that has functioned
better than politically created money. A recent example in the U.S. was
The Liberty Dollar, a privately issued currency 100% backed by silver and gold.
In November 2007 its assets were seized by the government on the absurd claim that
people might mistake it for worthless federal reserve notes.
realistic
basis and phased out of circulation. Here is how it can be
done:
1.
Repeal the
legal-tender laws. The federal government will continue accepting Federal Reserve
Notes in the payment of taxes, but everyone else will be free to accept them, reject them, or
discount them as they wish. There is no need to force people to accept honest
money. Only fiat money needs the threat of imprisonment to back it up. Private
institutions should be free to innovate and to compete. If people want to use Green
Stamps or Disney-ride coupons or Bank-of-America Notes as a medium of exchange, they
should be free to do so. The only requirement should be faithful fulfillment of
contract. If the Green-Stamp company says it will give a crystal lamp for seven
books of stamps, then it should be compelled to do so. Disney should be required to
accept the coupon in exactly the manner printed on the back. And, if
Bank of America tells its depositors they can have their dollars back any time they
want, it should be required to keep 100% backing (coins or Treasury Certificates)
in its vault at all times. In the transition to a new money, it is anticipated that the old
Federal Reserve Notes will continue to be widely used.
2. Freeze the present supply of Federal Reserve Notes,
except for what will be needed in step number six.
3.
Define the
"real" dollar in terms of precious-metal content, preferably what
it was in the past: 371.25 grains of silver. It could be another weight of silver or
even another metal, but the old silver dollar is a proven winner.
4.
Establish gold as
an auxiliary monetary reserve which can be substituted for
silver, not at a fixed-price ratio, but at whatever ratio is set by
the free market. Fixed ratios always become unfair over time as the
prices of gold and silver drift relative to each other. Although gold may be
substituted for silver at this ratio, it is only silver that is the
foundation for the dollar.
5.
Restore free
coinage at the U.S. Mint and issue silver "dollars" as well as gold
"pieces." Both dollars and pieces will be defined by metal content,
but only coins with silver content can be called dollars, half-dollars,
quarter-dollars, or tenth-dollars (dimes). At first, these coins will be derived
only from metal brought into
the Mint by private parties. They
must not be drawn from the Treasury's supply which is reserved for use in step number six.
6. Pay off the national debt with Federal Reserve Notes created for that purpose. Creating money without
backing is forbidden by the
Constitution; however, when no one is forced by law to accept Federal Reserve Notes as legal
tender, they will no longer be the official money of the United States. They will be merely a kind of government script which no
one is required to accept. Their utility will be determined by their usefulness in payment of taxes and by the public's
anticipation of having them exchanged for real money at a later date. The creation of Federal Reserve Notes, with the
understanding that they are not the official money of the United States, would
therefore not be a violation of
the Constitution. In any event, the deed is already done. The decision to redeem
government bonds with Federal Reserve Notes is not ours. Congress decided that long ago, and the course was set at the instant
those bonds were issued. We are merely playing out the hand. The money will be created for that purpose. Our only choice is when: now or later. If we allow the bonds to stand, the national debt
will be repudiated by inflation. The value of the original dollars will gradually be
reduced to zero while only
the interest remains. Everyone's purchasing power will be destroyed, and the nation will die. But if
we want not to repudiate the national debt and
decide to pay it off now, we will be released from the burden of interest payments
and, at the same time,
prepare the way for a sound monetary system.
7. Pledge the government's hoard of gold and silver (except the military stockpile) to be used as
backing for all the Federal Reserve Notes in circulation. The denationalization of these assets is long overdue. At various
times in recent history, it was illegal for Americans to own gold, and their private
holdings were
confiscated. The amount which was taken should be returned to the private sector as a
matter of principle. The rest of the gold supply also belongs to the people, because they
paid for it through taxes
and inflation. The government has no use for gold or silver except to support the money supply. The
time has come to give it
back to the people and use it for that purpose.
8. Determine the weight of all the gold and silver owned by the U.S. government and then calculate
the total value of that supply in terms
of real (silver) dollars.
9. Determine the number of all the
Federal Reserve Notes in circulation and
then calculate the real-dollar value of each one by dividing the value of the precious metals by the
number of Notes.
10.Retire all
Federal Reserve Notes from circulation by offering to exchange them for dollars at the calculated ratio. There
will be enough gold or
silver to redeem every Federal Reserve Note in circulation. 1
11.Convert all contracts based on Federal Reserve Notes to dollars using the same exchange ratio. That
includes the contracts called mortgages and government bonds. In that way, monetary values expressed within debt
obligations will be converted on the same basis and at the same time as currency.
12.Issue Silver
Certificates. As the Treasury
redeems Federal Reserve Notes
for dollars, recipients will have the option of taking coins or Treasury Certificates which are 100%
backed. These
Certificates will become the new paper currency.
13.Abolish the
Federal Reserve System. It would be possible to allow the System to continue as a check clearing-house so
long as it did not
function as a central bank. A check clearing-house will be needed, and the banks that
presently own the Fed should be allowed to continue performing that service. However, they must no longer receive tax subsidies
to operate, and competition must be allowed. However, the Federal Reserve System, as presently chartered by Congress,
must be abolished.
14.Introduce free
banking. Banks should be
deregulated and, at the same time,
cut loose from protection at taxpayers' expense. No more bailouts. The FDIC and other government
"insurance" agencies should
be phased out, and their functions turned over to real insurance companies in the private sector. Banks
should be required to
keep 100% reserves for demand deposits, because that is a contractual obligation. All forms of time
deposits should be
presented to the public exactly as CDs are today. In other words, the depositor should be
fully informed that his
1. Since the value of FRNs would be firmly established in
terms of real dollars, there would be
no compelling reason to exchange them, and it is possible that people would continue to use them in
daily commerce. Therefore, to retire the FRNs and make the transition as quickly as possible, it would
be necessary to have the banks
automatically exchange them for real dollars whenever they are deposited. In short order, they would become
collectors' items and historical curiosities.
money is invested and he will have
to wait a specified time before he can
have it back. Competition will insure that those institutions that best serve their customers' needs will
prosper. Those that do
not will fall by the wayside--without the need of an army of bank regulators.
15.Reduce the
size and scope of government. No solution to our economic problems is possible under socialism. It is the
author's view that the
government should be limited to the protection of life, liberty, and property—nothing
more. That means the elimination of
almost all of the socialist-oriented programs that now infest the federal bureaucracy.
If we hope to retain—or perhaps to
regain—our freedom, they simply have to go. To that end, the federal government should
sell all assets not directly related to its primary function of protection; it should privately sub-contract as many of its services
as possible; and it should greatly reduce and simplify its taxes.
16. Restore national
independence. A similar
restraint must be applied at the
international level. We must reverse all programs leading to disarmament and economic
interdependence. The most significant step in that direction will be to Get us out of the UN and the UN out of the US, but
that will be just the beginning. There are hundreds of treaties and administrative
agreements that must be
rescinded. There may be a few that are constructive and mutually beneficial to us and
other nations, but the great majority of them will have to go. That is not because we are isolationist. It is simply because we
want to avoid being engulfed in
global tyranny.
Some will say that paying off the
national debt with Federal Reserve Notes amounts to a repudiation of the debt. Not so. Accepting the old Notes for payment
of taxes is not repudiation. Exchanging them for their appropriate share of the nation's gold or silver is not repudiation. Converting
them straight across to a sound money with little or no loss of purchasing
power is not repudiation.
The only thing that would be repudiated is the old monetary system, but that was designed to be repudiated. The monetary and political scientists who
created and sustained the Federal Reserve System never intended to repay the
national debt. It has been
their ticket to profit and power. Inflation is repudiation on the installment plan. The present
system is a political trick, an
accounting gimmick. We are merely acknowledging what it
is. We are simply
refusing to pretend we don't understand what they are doing to us. We
are refusing to play the game any longer.
MEASURING THE SIZE OF THE HANGOVER
So those are the sixteen steps, but
what are their effects? It should come as no surprise that there is a price to pay for a return to monetary sobriety. A hangover
cannot be avoided, except by continuing the binge, which is the road to death. Let's take a look at what this binge has already cost us.
We will measure that by calculating how
much each Federal Reserve Note will be worth when the new money appears.
The following figures are presented
for illustrative purposes only. The data are drawn from public sources and from the Federal Reserve itself, but there is no way
to know how accurate they really are. In addition to the question of accuracy, there are
some statistical
items which are so obscure that not even the experts at the Fed are certain what they mean.
When the time comes to apply this program, it will be necessary to assemble a task force of experts who can audit the books and assay the
metals. Nevertheless, based on the best information available to the public, this is what we get:
The total quantity of silver held by
the government on September 30,
1993, was 30,200,000 troy ounces. If we assume the new dollar will be defined as 371.25 grains of
silver (which
equals .77344 troy ounces), then that supply is valued at $39,046,338.1
The price of gold on that date was
384.95 Federal-Reserve notes per ounce. Silver was 4.99 fiat dollars per ounce. The ratio between
them, therefore, was 77-to-1.
The supply of
gold was 261,900,000 ounces. The value of the gold supply, therefore, (at 77 times its weight in
ounces) was $26,073,517,000.
The value of silver and gold combined
would be $26,112,563,338.
1. Although the weight of the silver-dollar is 412.5
grains (.8594 troy ounces), it is only 90% pure. Its silver content, however,
is exactly 371.25 grains (.77344 troy ounces).
The number of
Federal-Reserve notes this supply would have to redeem would be the combined total of the M1 money supply (currency and demand deposits)
plus the additional number of notes
needed to pay off the national debt. M1 on September 27, 1993, was 1,103,700,000,000 FRNs. 1 The national debt stood at 4,395,700,000,000 FRNs. The total amount to be redeemed, therefore,
would be 5,499,400,000,000
FRNs.
The bottom line
of this calculation is that the value of each Federal-Reserve note will be equal to .0047 silver
dollar. One silver dollar
would be worth 213 Federal-Reserve notes!
BAD, BUT NOT THAT BAD
That will be a
bitter pill to swallow, but it sounds worse than it really is. Remember that the new
dollars will have more purchasing power than the old. Coins will play a larger
role in everyday transactions.
The nickel phone call and the ten-cent cigar will have returned. In the beginning at least,
the price of these items probably will be less than that. As explained in chapter seven,
any quantity of gold or silver
will work as the foundation for a monetary system. If the quantity is low—as certainly will
be the case at the time of transition—it merely means the value of each unit of measure will be high. In that case, coins will
solve the problem. Pennies would be used for a cup of coffee; one mill (a tenth of a
cent) would pay for a phone
call, and so on. New, small-denomination tokens would fill that need. In a relatively short period of
time, however, the monetary
supply of gold and silver would increase in response to free-market demand. When the
supply increases, the relative value will decrease until a natural equilibrium is reached—as always has happened in the past. At
that point, the tokens will no longer be needed and can be phased out.
An inconvenience? Yes. Vending
machines will have to be retrofitted for
the new coins, but that would be no more difficult than retrofitting them to take paper
bills or plastic debit cards, which is what will be required if we do not adopt these measures. It is a small price to pay for an orderly return to real
money.
1. For those who feel that M2 or M3 would be a more
logical figure, see 'Is M1 Subtractive or Accumulative?' in the Appendix, containing the author's
notes and correspondence
with the Federal Reserve.
Another possible solution would be to redefine the new dollar to contain a smaller quantity of silver. The
advantage would be that we
could continue to use our present coinage. On the negative side, however, is the fact that it would create
headaches after the transition,
because coinage then would be too cheap. Instead of changing over now, we would merely be postponing the task for
later. Now is the time to do it—and do it
right. The original value of a silver dollar was determined after centuries of trial and error. We don't have to reinvent the wheel. We know that it will work in the long run.
In the past,
the banks have enjoyed a bountiful cash flow from interest on money created out of
nothing. That will change. They will have to make a clear distinction between demand
deposits and time deposits.
Customers will be informed that, if they want the privilege of receiving their
money back on demand, their deposit of coins or Treasury Certificates will be
kept in the vault and not lent to others. Therefore, it will not earn interest for the bank. If the bank cannot make money on the
deposit, then it must charge the depositor a fee for safeguarding his money and for
checking services. If
the customer wants to earn interest on his deposit, then he will be informed
that it will be invested or lent out, in which case he cannot expect to get it back any
time he wants. He will knowingly put
his money into a time deposit with the agreement that a specified amount of time must pass before the
investment matures.
The effect of
this practice on banking will be enormous. Banks will have to pay higher
interest rates to attract investment capital. They will have to trim their overhead expenses and
eliminate some of the plush.
Profit margins will be tightened. Efficiency will improve. They used to offer
"free" services which actually were paid out of interest earned on their customers' demand
deposits. Now they will
charge for those services, such as checking and safe storage of deposits. Customers
probably will grumble at first at having to pay for those things, and there will be no
more free toasters.
Electronic transfer systems will
probably become popular for their convenience, but they will be optional. Cash and check transactions will continue to play
an important role. Government monitoring will be illegal. Although there will be fewer dollars in circulation than there were Federal
Reserve Notes, the value of
each one will be correspondingly
greater. Each person will end up with the same purchasing power he had before
the conversion. For a short period,
both the old and the new money will circulate together, and some people will have difficulty making
the necessary
calculations to determine their relative values. But that is a routine operation for people who live
in Europe or for anyone who travels to a foreign country. There is no reason to think that Americans are too stupid to handle
it.
SOME BAD NEWS AND SOME GOOD
We should not
delude ourselves into thinking that this will be an easy transition. It will be a very difficult period,
and people will have to get used
to a whole new way of thinking and doing. The freeze on the current money supply may trigger panic in
the stock market and the
business community. Stock prices could tumble, causing paper fortunes to disappear back into the
computers from which they came.
Some businesses may fold for a lack of easy credit. Weak banks will be allowed to close rather than
be bailed out with taxes.
Unemployment may worsen for a while. Those who have been used to a free ride will now have to walk or
push or pay their way. The masses on welfare will not give up their checks and food stamps quietly. The media will
fan the flames of discontent. The Cabal will be at every switch to derail the train.
This will be the moment of our
greatest danger, the moment when the people could tire of their hard journey in
the desert and lose interest
in the promised land. This is the time when they may long for a return to captivity and
head back to the slave pits of Pharaoh.
The important point, however, is that
most of these problems would be
temporary. They would be present only during the period of transition to a new money. As soon as free
coinage is available at the
Mint, and as soon as people see how much demand there is for silver and gold coins, there will be a
steady stream of miners and
jewelers who will add great new stores of precious metal to the nation's monetary stock.
Foreigners undoubtedly will add to the inflow. Old silver and gold coins will also reappear in the market place. Very quickly, as
the stores of precious metal respond to supply
and demand, the quantity of money will increase
and its per-unit value will drop to its natural, equilibrium.
Won't that be inflation? Yes it will,
but it will be significantly different from inflation by fiat money on four
counts: (1) instead of being caused by politicians and bankers attempting to manipulate the economy to
enhance their personal agendas, it will be caused by natural
economic forces seeking an equilibrium of supply and demand; (2)
instead of being harmful to the nation, leading to the destruction of the
economy, it will be part of a healing process, leading to prosperity; (3) it will be
less severe than what we will experience if we do not make the transition; and (4), instead
of being part of a continuum that is designed to go on forever, it will have a built-in
termination point: the point of natural equilibrium where the human
effort to mine gold and silver equals the effort to create those
things which gold and silver can buy. When that point is reached, the
money supply will cease to expand, and inflation will stop—once and for all. The
hangover will be gone. From that point forward, prices will begin a
gradual descent as advances in technology allow improved efficiency in production.
With the arrival of lower prices, better job opportunities, and increasing prosperity, the
voices of discontent will gradually fade. After the storm is over,
America will have an honest money supply, a government with no national debt,
and an economy without inflation.
No matter what scenario unfolds in the future, there is white water ahead. We
had better tighten our straps and prepare for the rapids. We owe it
to ourselves and our families to take measures which will increase our chances of
coming out at the other side. If the pessimistic scenario is played
out, it will make little difference what we do, because there will be no other side. But
in the realistic scenario, there are certain precautions that will make a big difference in our
economic well being.
To fully appreciate the wisdom of some of these measures, it is well for us to
pause and consider the possibility that a transition to economic safety
and sanity will not be orderly. Another variant of the realistic
scenario is that our entire system could collapse, including the
international structure being assembled at the UN. If that should
happen, we won't have to worry about an orderly transition to a sound monetary system,
because it won't happen. Our primary concern will be basic survival.
Economic chaos and civil disorder would not necessarily have to be the prelude to world government. If
a sufficient number of
people were well enough informed to
know in advance what the enemy's game
plan is, and especially if they were in the right places within the system, they might be able
to provide leadership at the critical moment. If there is blood in the streets
and long periods of anarchy, it is
theoretically possible that groups of enlightened individuals who have prepared in
advance could move into the power vacuum and take charge. That may sound like another pessimistic scenario, but it is not.
In the final analysis, it may be the most realistic one of all. But we should not hope for it.
All we can do is prepare
for it should it come to pass.
HOW TO PREPARE
What can we do
to prepare financially? To avoid making this a lengthy dissertation, let's use the outline form.
Elaboration should not be
necessary.
1. Get out of debt. A mortgage on one's home is a logical exception, provided the price is right.
Borrowing for one's business is also an exception if based on a sound business plan.
Speculative investments are
not a good idea in these times unless they are made with money you can afford to lose.
2. Pick a sound bank. Maintain accounts at several institutions. Do not keep over $250,000 in any one
bank. Remember that not all types of accounts are covered by FDIC. Some institutions now offer private insurance. Make sure
you know to what extent you are at risk.1
3. Diversify your investments among blue chip, over-the- counter, growth, income, large, small,
mutuals, bonds, real estate, bullion coins, mining stock, tangibles, and even currencies.
Industries that do well in hard times are gambling, alcohol, and escapist entertainment. Study the fields and
companies in which you invest. Personal
knowledge is indispensable.
4. Avoid the most recent "best" performers. Their great track records are historical. They have no
bearing on future performance. To
the contrary, they may now be overpriced and
1. That is not an easy assignment. It helps to have
professional assistance from an independent source which is able to analyze asset quality, loan ratios,
equity ratios, loan-loss
reserves, and the like. One of the best sources of this kind of information is Veribanc. For a nominal fee, this
bank-rating service will provide you with detailed reports on any bank or
saving & loan in America. If you want their brochure, write to them at P.O. Box 461, Wakefield, MA
01880.
poised for a fall. See how an investment fared over the
long run—at least
fifteen years—and particularly how it performed during periods of economic downturn.
5. When investing in coins, avoid those with high numismatic value—unless you are prepared to become
an expert. As with other types of
investments, seek advice but
don't depend on it. The same is
true for diamonds, art pieces, and other collectibles. Stay with what you know. Otherwise,
you will be vulnerable in shark-infested waters where even the most experienced traders can lose money.
6. Maintain a stash of cash, including old silver coins. Have enough currency to provide
necessities for about two months if banks cannot process credit cards or checks. The coins are
for more severe
conditions. It's also wise to maintain a good supply of food and water just in case the delivery systems should
cease to function.
Hope for the best; prepare for the worst.
PROFITING FROM DISASTER
All of this is aimed at surviving the
storm and preparing to offer
leadership in troubled times ahead. That is a rather negative view. There is a more positive
outlook for those who are looking for good news, as Adlai Stevenson said. It is the
exciting prospect that we can turn
this calamity to our advantage. We can actually profit from the coming
collapse. That thought has spawned hundreds of books and newsletters offering
advice on how to get rich while others are being destroyed. There is even one that gives advice on how to cash in on the
environmental-industry boom. The pitch is how to make a fortune on the downfall of
America.
There is no doubt that opportunities
exist to profit from investment
decisions based on a realistic appraisal of current trends. Most of those opportunities,
however, depend on making market-timing decisions. One must know precisely when
to buy, when to sell,
and at what price. To know all that, the investor must become expert on the nature of the
industries involved and must monitor the daily shifts in market forces. He must attempt to complete his analysis and reach his
conclusions in advance of the crowd. And, of course, he must be right. Most investors are not prepared to do that, so they must
depend on the services of professionals, usually the same experts who are encouraging them to
invest in these kinds of
enterprises. If the investment is profit-
able, the
analyst receives an income. If the investment turns sour, the analyst still receives an income.
That relationship is not unique to
the "profit-from-crash" group. It is to be found at every level of the investment
business as well as within
the legal and medical professions. The customer pays for the advice regardless
of its quality. What is disturbing about this investment concept is that it actually may
help to make matters worse.
By focusing on finding clever ways to avoid the effects of inflation or of making a profit from it, we
are doing nothing to stop
it and, thereby, encouraging its continuation. Those who are gaining from inflation are
not likely to offer serious resistance to it. As they watch their profits pile up, they may become its most ardent
supporters—even though they know deep in their hearts that it will destroy them in the end.
There is
nothing wrong with trying to preserve one's capital in hard times, but the only real
solution is to use one's capital to stop the present trends. In the long run, there is no way to
profit from a destroyed
America. There is no refuge from a collapse. There is no way to protect your assets, your
home, your job, your family, your freedom. As Henry Hazlitt phrased it, "There is no
safe hedge against
inflation except to stop it."
A PRO-ACTIVE CRUSADE
It is clear
from the facts presented in this book that much more needs to be done than abolishing the
Federal Reserve. Although that would be a great victory for economic and personal freedom, unfortunately, the creature has
siblings, and they hunt and feed together. There is an income tax designed to eliminate
the middle class, a school
system more concerned with politically correct attitudes than with education, a controlled media that
corrupts the news, controlled
political parties that create the illusion of participating in our political destiny, and
the UN rapidly absorbing our military and economic sovereignty. We are not likely to slay one of these creatures without the others.
We must eradicate the species.
The species is collectivism. Collectivism is the concept that the group is more important than the
individual and that government is justified in any act so long as it is claimed
to be for the greater good of the
greater number. That is the foundation upon which the Federal Reserve is built and it is
the foundation for literally every other modern assault against our liberty. Collectivism is
the enemy
of freedom, and we must launch a
pro-active crusade against it. Not to do so is to surrender without a fight.
The first step in
this crusade is to spread the word. Americans have allowed their nation to be
stolen from right under their noses because they did not understand what
was happening. This is not just an American phenomenon. The same theft has occurred with minor variations
in every advanced nation of the world. There is no hope for the
future as long as that condition remains. Therefore, the starting point for
any realistic plan for survival and beyond is an awakening of
America—and the world.
Unfortunately,
that will not be enough. Education is important, but it makes little difference what
we know if we don't do anything with that knowledge. It has been said
that knowledge is power, but that is one of the greatest myths of all time. Men
with great knowledge are easily enslaved if they do nothing to defend their freedom. Knowledge
by itself is not power, but it holds the potential for power if we use it as a guide for
action. Truth will always be defeated by tyranny unless people are willing to step
forward and put their lives into the battle. The future belongs, not to ideas,
but to people who act on those ideas.
WHAT WILL BE REQUIRED FOR VICTORY
Defeating the
global powers of collectivism is a big order, and we must be very
clear on what will be required. Here are the realities.
1.There is not much that can be done by one person alone. We need lots of help, and
it will have to be international in scope. National efforts will continue to be
important, but collectivism is entrenched globally. The whole world is now our
theater of conflict.
2. We need a corps of
dedicated men and women who are prepared to devote a major portion of their
lives to this mission. Much more will be required than merely supporting a
political party, or subscribing to a periodical, or writing letters to politicians. The time for
armchair patriotism is over.
3. We need a
comprehensive training program to expose the tactics used by agents of
collectivism and to show how we can ethically counter them.
4. We need the
same support mechanisms that our foes have long enjoyed: coordination, strategy,
training, communications. Any plan without these elements is doomed to failure.
5.We need an
organizational structure that cannot be subverted by our opponents. It must be
designed, not as a pyramid with all control at the top, but as a hologram with
each of the smallest units able to create the entire movement from the bottom up.
6.We need
dependable funding to support the many services needed for organizational activities.
7.We need a clear
statement of positive principle. It is not enough to know what we
are against. We must also know what we are for.
8.We need a
strategy, not for petitioning leaders, but for becoming leaders within
our respective countries.
9.We need the long
view of history, realizing that our mission may not be completed in our lifetime.
What we set in motion must be larger than ourselves and it must have momentum into
the future.1
CONCLUSIONS AND SUMMARY
We have finally
come to the end of this book. It was not a textbook on banking theory. It was a
who-dunnit, and by now you know the answer.
We have covered a
vast expanse of history and have wandered far afield from our main topic. It was
necessary. Without the larger view, the case against the Federal Reserve System
would have been weak. It would have omitted the elements of war, revolution, depression, and
fraud. Without that long journey, we would be limited to a sterile discussion of
interest rates, discount policies, and reserve ratios. That is not where
the body is hidden.
In the foreword, it was stated that there were seven
reasons to abolish the Federal Reserve System. It is time to repeat them:
1. All of these attributes have been incorporated into
an organization called Freedom Force
International. Additional information is located at the end of this chapter.
·
It is incapable of accomplishing its stated objectives.
·
It is
a cartel operating against the public interest.
·
It is
the supreme instrument of usury.
·
It
generates our most unfair tax.
·
It
encourages war.
·
It destabilizes the
economy.
· It is an instrument of totalitarianism.
The purpose of this book has been to
demonstrate the accuracy of those
assertions.
A plan for recovery was finally presented which involves sixteen steps, each based upon lessons which
emerged from history. These lessons
were mingled with a large amount of theory which is traceable only to the mind of the author himself. Which is to say there is no guarantee the plan will work.
But it is a plan. It is better to fail trying than to do
nothing. Like men on a sinking ship, we must risk the water. We cannot stay where we are.
There undoubtedly are technical
flaws in these proposals, for the mechanism is merely a prototype. Someone surely will discover a gear that will not mesh or a lever
that is disconnected. It will need the additional work of specialists in many diverse
fields. Even then, the job will not
be complete, for it must finally be handed over to those who are skilled in drafting
legislation. Their task will be two-fold. First, they must make it workable in the real
world of politics.
Secondly, they must prevent loopholes and vagaries which could eventually subvert the plan.
But none of these considerations
should deter us from beginning the process. We may not have answers to all the technical questions, but we do have an answer to the big question.
We do know that the Federal Reserve System
must be abolished. Let us, therefore, begin.
The Creature has grown large and
powerful since its conception on Jekyll Island. It now roams across every continent and compels the masses to serve it, feed
it, obey it, worship it. If it is not slain, it will become our eternal lord and master.
Can it be slain?
Yes it can.
How will it be slain? By piercing it with a
million lances of truth. Who will slay it? A
million crusaders with determination and courage.
The
crusade has already begun.